Scrapping tariffs will add further pressure to car makers: peak body

The FCAI has criticised calls to erase a 5 per cent tariff on imported cars.

12 February 2014Sam Hall

Without any local car industry to protect, the government could remove import duty applied to new cars.

Australia?s peak automotive body has warned scrapping remaining tariffs on imported motor vehicles before 2017 will enhance pressure on Australia?s car makers, amid speculation one will fast track its manufacturing end date if current volumes are further eroded.

Federal treasurer Joe Hockey has indicated the government will consider erasing tariffs on imported vehicles in a review of taxation in the next 18 months.

?There's a legitimate case put forward to remove tariffs where there is no local motor vehicle manufacturing industry,? Mr Hockey told Fairfax Radio on Wednesday.

Under current measures, cars built in Thailand and the US are imported to Australia duty free, but vehicles shipped in from other markets are subject to a 5 per cent tariff.

Erasing all tariffs could reduce the price of new imported vehicles by between $300 and several thousand dollars.

However, as has happened previously, car makers could absorb some of the savings or fit more equipment in an effort to protect resale values.

According to Federal Chamber of Automotive Industries chief Tony Weber, a move to scrap tariffs before 2017 ? therefore removing protection for the local industry ? would put further jobs in immediate jeopardy because it would disadvantage the pricing of locally-produced vehicles.

?Any reduction in the level of protection on the domestic market for the three domestic producers would put added pressure on them at a very difficult time,? Weber said. ?Any reduction in the tariff should be done post-manufacturing.

?The government recognises the turmoil in the industry and we would ask they do not add further pressure for the structural adjustment for the workers and the industry itself ... $1000 is a lot to trim off the price of a locally-produced car.?

The federal government is due to commence a Free Trade Agreement with Korea this year, followed soon after by separate agreements with Japan and China.

Trade minister Andrew Robb said the Korean agreement would include a phased removal of a 5 per cent tariff of Korean automotive imports, as well as an elimination of tariffs on Australian automotive exports.

Between them, the US, Thailand, South Korea, China and Japan imported about 750,000 vehicles to Australia in 2013 ? or roughly 70 per cent of the 1.1 million new-vehicle sales.

Calls to scrap tariffs come as the industry braces for further cost-cutting measures from Ford Australia due to flagging sales of the brand?s locally-produced vehicles, the Falcon and the Territory.

Ford has indicated it will cease manufacturing operations by October 2016, but has not ruled out closing its doors sooner.

?You look what?s happened to Ford?s sale volumes ? you look at what they?re selling on Falcon and Territory, I think they want to get out,? one source said, pointing to the company?s upcoming EBA agreement next year as a possible trigger. ?There are a lot of indicators they will go early.?

Sales of Ford?s Australian-produced vehicles have halved since 2008, from 57,534 annual sales to 29,550 last year.

Earlier this month, Ford announced 300 redundancies at its Victorian plants, effective by June.

A Ford spokesperson said the company was open to reviewing its manufacturing end date in Australia.

?We always have intended to continue manufacturing until 2016. We are going to closely monitor the market and our operations and if there is a major disruption to any of those plans then we may have to go back and re-evaluate the plan,? the spokesperson said.

?Our intention is to manufacture until 2016 and importantly, we?re on track with the launch of the new Falcon and Territory later this year.?

Car makers and the industry are also calling for the removal of the controversial 33 per cent luxury car tax, which makes many mainstream models more expensive and can add tens of thousands of dollars to the price luxury models.

^ Estimated price only; import tariff does not apply to full retail price, only the price paid by the importer; 5 per cent import duty does not apply to cars made in Australia, Thailand and the United States

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